US patent litigation racks up more than just legal fees

A recent paper estimates the total cost of patent litigation to alleged infringers. Paraphrased from the abstract, the researchers analyzed stock market event studies around the date of patent lawsuit filings for US public firms from 1984-99 (See my post of May 4, 2007: event studies with patent lawsuits.). They found that the total costs of litigation are much greater than legal fees, and that costs are large even for lawsuits that settle. Lawsuits cost alleged infringers an average of $28.7 million and a median of $2.9 million (See my post of Oct. 2, 2008: costs of patent litigation, with 13 references.). Moreover, infringement risk rose sharply during the late 1990s to over 14 percent of R&D spending. Small firms have lower risk relative to R&D.

The research paper is Bessen, James E. and Meurer, Michael J., The Private Costs of Patent Litigation (Feb. 1, 2008). Boston University School of Law Working Paper No. 07-08 at SSRN: http://ssrn.com/abstract=983736